The price of the popular online “cryptocurrency” Bitcoin has reached all-time highs in recent weeks, with many wondering what will happen next as the Bitcoin bubble expands ever-larger. While many are focused on heightened interest in Bitcoin from Japanese and South Korean retail investors, which is massively driving up its trade value, there’s another major player in the mix that many people aren’t considering: The world’s second-largest economy, China.
Believe it or not, most of the Bitcoin “mining” operations in existence are currently located in China, which is curious because cryptocurrencies seemingly represent the exact opposite of communism. The decentralized, peer-to-peer format of Bitcoin isn’t exactly in the best interest of authoritarian governments, in other words, and yet Bitcoin operations are strong in China.
The reason for this, reports indicate, is that by allowing Bitcoin mining in China, the Chinese government can effectively monopolize control over the blockchain. Bitcoin in China is basically a tool by which more power and control can be leveraged for the political elite, which is why it hasn’t yet fully hit the chopping block. (RELATED: Want to learn more about Bitcoin and keep up with the latest developments on it? Be sure to bookmark and visit Bitcoin.Fetch.news)
“Since China can have such a huge impact on the price of Bitcoin, why wouldn’t the Chinese government use this power to its advantage?” asks China Uncensored. “Chinese government regulators can, in theory, exert a huge influence on the global price of Bitcoin. So, if you own Bitcoin, well, the value of your money can be heavily influenced by the whims of the world’s largest authoritarian regime.”
It is widely believed that the great Bitcoin crash of 2013 was engineered by the People’s Bank of China (PBOC) when government authorities suddenly prohibited local financial institutions from dealing in the digital currency. Bitcoin had risen in value from $100 per “coin” in September to $1,000 in November. It then crashed seemingly overnight, causing major losses for folks who weren’t paying attention.
Not long after, the Japanese Bitcoin exchange Mt. Gox came to a grinding halt, which brought about a bear market for Bitcoin that lasted until the end of 2015. Bitcoin reached a crescendo in recent weeks when it hit nearly $3,000 per coin (it’s just over $2,500 now as of this writing after having dropped some), suggesting that another major crash is on the way.
The situation is ripe for another massive plunge as Chinese authorities are once again chomping at the bit to crack down on Bitcoin. One of the driving factors for this is the way that some Chinese citizens are using Bitcoin as a means by which to take their money out of China and hide it elsewhere. The government wants to limit the amount of the foreign currency that people can buy in order to prevent this, which would have a dramatic impact on the price of Bitcoin for the rest of the world.
At the same time, restricting Bitcoin in just the right way will still allow the country’s wealthy elite to continue to profit from it. After all, Bitcoin transaction are not anonymous for Chinese citizens, as they are required by law to link their bank accounts to their Bitcoin accounts in order for authorities to keep tabs on people’s buying and selling habits.
“Chinese authorities again resorted to jawboning to influence the Bitcoin price when they announced in January that they were investigating the country’s digital currency exchanges,” explains Zero Hedge.